How to keep stakeholders on side

Well, 2014 has seen something of a repeat of those rebellions, with a string of companies suffering at the hands of shareholders. When Sir Martin Sorrell, the advertising executive who has built WPP into a global advertising powerhouse, sees almost a third of shareholders fail to support his remuneration package, you know something is going on.

That something, however, isn’t quite what you might think. The rebellions at companies such as WPP – and there have been many in recent weeks and months – represent not so much a rejection of the pay packages businesses are awarding their executives, but a failure of communication and engagement. Where companies listen to the concerns of shareholders – and respond accordingly – these public confrontations should never take place.

That’s not to say shareholders will never disagree with the course of action steered by company’s executives – whether on pay, strategic direction or something else. But the key to avoiding an embarrassing row at the annual general meeting is a process of continual engagement which gives shareholders and executives alike the chance to make their case to one another. The argument should be over long before investors start casting their votes.

Moreover, the lessons of the shareholder spring do not apply only to publicly-listed companies – or even only to large customers. All businesses need to learn how to improve engagement with their key stakeholders – investors, employees, customers and the wider communities in which they operate. Not because it’s the right thing to do, though many businesses feel that way, but because companies that operate with the support of all their stakeholders have a greater chance of commercial success.

In practice, successful engagement is a three-step process:

1. Find out who your stakeholders are

Start by identifying your key stakeholders, which will vary by organisation. Think about customers, suppliers, investors, employees, the local community – and anyone else with a stake in the way your business behaves and transacts.

2. Communicate and consult with your stakeholders

There are all sorts of ways to tell stakeholders about your business’s activities and views – everything to printed newsletters to sophisticated digital media presentations. Take advantage of the most appropriate channels for your audience. At the same time, however, don’t forget that communication is a two-way process – you’ll need to provide ways for stakeholders to tell you what they think too. These might include public and private meetings, feedback forms, social media forums and a whole range of other devices.

3. Involve your stakeholders

Companies can’t be run as pure democracies, but that doesn’t mean stakeholders shouldn’t be given a chance to get involved in your business. There may be opportunities for representatives of particular groups to sit on management committees, for example, or to set up advisory groups that will work with the company. This process often adds real commercial value.

David Prosser is a freelance journalist who specialises in writing about business, entrepreneurs, personal finance, property and investment. David has worked across all the major broadsheets including The Observer, the Daily and Sunday Express and, most recently, The Independent, where he spent several years as Business Editor managing the newspaper’s business coverage. David’s forth and final blog will appear next Monday 4 August. 

David Prosser is a former business editor of The Independent .